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Lottery fund: Transparency, accountability essential

By Shelagh Gastrow

The South African government has established two key agencies to support our civil society. They are the National Lottery Distribution Trust Fund and the National Development Agency. However, their activities and decision-making lie in the mist of obscurity. Organisations are starting to call for greater transparency as it is unclear whether they have met their mandates and whether funds are reaching those they are meant to support.

It is extremely difficult to find out what is going on in the National Development Agency (NDA) where a lack of accountability has taken root. No complete list of beneficiaries has ever been made public in the annual reports of the NDA or on its website. There is no record of the NDA ever having formally presented such a list to Parliament’s portfolio committee on social development. The NDA’s record in good administration is dismal. Its first CEO, Thoahlane Thoahlane, an academic with little social development experience, left after a year and was replaced by board member Delani Mthembu in an acting capacity. During this time the NDA was caught in a corruption and fraud scandal including failure to disburse funds and even allegations of arson. In the meantime the EU froze grants when about R50 million of its money was found unused in an NDA bank account for 18 months. The impact on NGOs was horrific and many closed their doors.

Following an investigation prompted by the minister of social development, disciplinary charges were brought against Mthembu for “his interest in projects that received finance from the NDA”. At the same time, charges of misconduct were also brought against the chief operations officer, Pule Zwane, for procedural irregularities in hiring staff and for co-operating with the CEO in awarding bonuses amounting to R800 000 to staff without proper authorisation. They were both suspended on full pay and Zwane was paid more than R600 000 a year for two years while under suspension. Of critical importance is the lack of governance that was displayed. At no point during his tenure was Mthembu called to account for the lack of disbursement or for the financial irregularities. No criminal charges were laid against Mthembu or Zwane and the NDA spent R1.2 million investigating the allegations. Mthembu resigned in 2004.

The minister then appointed a new NDA board chaired by Bishop Malusi Mpumlwana. This new board took over at a time when the NDA was in disarray with internal systems and administrative chaos compounded by its poor relationship with the EU, which required efficient administrative procedures to manage and disburse its funds. A new CEO, Godfrey Mokate, previously deputy director-general in the department of provincial and local government, was appointed in June 2005. Under the watch of the new board the NDA was embroiled in another corruption scandal but was at least more decisive than previously and went as far as laying a criminal charge against an accounts clerk who nevertheless managed to get away with about R7 million of EU money.

Eventually Mokate was asked to resign for poor management of the NDA and its resources in 2009.

Again, a new board was appointed, this time chaired by Malose Kekana, and a new CEO, Vuyelwa Nhlapo, was employed. When the Funding Practice Alliance, a group of NGOs undertaking research into the lotteries and the NDA, requested access to NDA staff and records, this was firmly turned down by Nhlapo. Why? Again, new brooms don’t seem to sweep clean and they fall back again on a lack of accountability.

In the meantime NGOs and community-based organisations (CBO) continue to close their doors. Resources, which were allocated for the sustainability of this sector, have been mismanaged, stolen, delayed or not distributed. NDA personnel blame civil-society organisations for the problems that exist. When it was asked to account to Scopa (the parliamentary financial management committee) the chairperson, Themba Godi, refused to accept excuses by NDA staff that poor levels of reporting were a result of the illiteracy of funding recipients. He said that it was the responsibility of NDA staff to take time to visit the projects and suggested that it was more likely that NDA staff “who can read” had neglected their duties.

Beyond the NDA, research has shown deep dissatisfaction on the part of charities and other non-profits with the running of the National Lotteries Board and National Lottery Distribution Trust Fund. Two NGOs, the SA Education and Environment Project and Sikhula Sonke, took the National Lotteries Board to court for administrative incompetence. Judge Patrick Gamble found in favour of the NGOs and said that it was unacceptable for the National Lotteries Board to deny responsibility for the activities of the distribution agencies that make decisions on grants. The view of the board was that these structures were only accountable to the minister. The fact is that the grantmaking process, developed by the department of trade and industry when establishing the lotteries, is deeply flawed and yet both the DTI and the NLB continue to defend a system whereby the people who make decisions, about which organisations receive grants, do not account to the National Lotteries Board, but directly to the minister.

Further, research has also shown that there are no scheduled meetings with the DTI minister to account for the distribution of lotteries funding, even though he has formal oversight. This indicates a serious and most worrying lack of good governance. In his ruling, Judge Gamble indicated that there was not enough information to suggest that the NLB was in a state of institutional disarray but he did point out the tardiness experienced by NGOs and that there was no reason for funding applicants “to partake in a game of administrative snakes and ladders, where the slightest non-compliance with self-imposed peremptory criteria means that one has to return to the start”.

NLB spokesperson Sershan Naidoo has frequently laid responsibility for this at the door of NGOs and CBOs, stating that outstanding documents from these organisations cause delays in payments. This may well be true. However, when working in poor communities, greater effort should be made by the agency to ensure that there is an understanding at the distribution agencies of the context within which organisations work, and a meaningful effort should be made to ensure that documents are received. In addition, research has shown that many NGOs and CBOs claim that the correct documents were sent to the national lottery’s central applications office, but were lost there and, despite resending documents, their applications go awry. In addition, there have been continual complaints from organisations that, in cases where grants are awarded, it can take months (and even years) for payments to be made. That said, it must be noted that recent changes have been made by the structures of the NLB to improve performance and reports from the sector seem to indicate that there has been greater efficiency. Time will tell if this will be sustained.

It is the responsibility of the DTI minister to appoint members of the lotteries board, and it appears that most of them are political appointees with limited experience either of gaming, grantmaking or of the non-profit sector. As intended by the legislation, an independent body would promote greater accountability especially if some members of the lotteries board actually represented civil society. This would at least go some way to tackling the lack of transparency.

The context in which government operates is changing. New technologies and the speed with which communication happens means that the public can and should be able to demand higher degrees of transparency by government. Accountability and transparency are the values which underpin good governance and contribute to better performance by the civil service. Politicians seem to forget that they are appointed in service of the people who voted for them, rather than to gain power and act in their own self-interest. The South African situation is worrying because corruption is rife and will contribute to deepening poverty rather than eradicating it. Internationally it is recognised that corruption impedes economic development, undermines stability and erodes trust in public institutions. As a result, essential public infrastructure will degenerate and the effects will be felt by the people least able to affect change, the poor.

South Africa needs transparent and publicly appointed boards that include people with the capacity to govern our institutions rather than political deployments to reward loyal cadres with soft jobs. They should be people with knowledge and skills in the area which the board operates.

Good governance will not end poverty but it will go a long way to improve the situation. In South Africa as many as 29 966 government-funded projects have been established which are aimed at reducing poverty (Public Service Commission 2007) and yet poverty levels in South Africa remain unacceptably high with about half the population living in poverty.

The service-delivery protests, which have swept the country in the past few years, indicate that despite the ANC’s popularity at the polls there is dissatisfaction with levels of service delivery. The South African government may be sitting on a time bomb if they do not partner strategically with civil society. Transparency and accountability are critical to the success of this partnership while rebuilding relationships that have broken down during the government’s policy move towards a developmental state. Indications are clear that there is limited understanding at all levels of government of what this developmental state will mean. A transition from the old to the new requires greater participation by civil society but instead government has alienated this very important sector.

The Funding Practice Alliance made up of the Community Development Resource Association, Inyathelo: The South African Institute for Advancement, Rural Education Access Programme and the Social Change Assistance Trust with support from many civil-society organisations believes that a strong and independent civil society will contribute to a mature democracy in South Africa. An independent civil society will allow for better “watchdog” actions and monitoring of the state. It also creates the space for creative responses to complex societal challenges and dialogue between state actors and the people they are appointed to serve.